Good day, ladies and gentlemen, and welcome to the Super Micro Second Quarter Fiscal 2021 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to turn the conference over to your host, Mr. James Kisner, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and thank you for attending Supermicro's call to discuss financial results for the second quarter of fiscal 2021, which ended December 31, 2020. By now, you should have received a copy of the news release from the company that was distributed at the close of regular trading and is available on the company's website. As a reminder, during today's call, the company will refer to a presentation that is available to participants in the Investor Relations section of the company's website under the Events & Presentations tab. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation and future business outlook, including the potential impact of COVID-19 on the company's business and results of operations. There are a number of risk factors that could cause Super Micro's future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our most recent 10-K filing for fiscal year 2020 and our other SEC filings. All of these documents are available on the Investor Relations page of Supermicro's website. We assume no obligation to update any forward-looking statements. Most of today's presentation will refer to non-GAAP financial results and business outlook. For an explanation of our non-GAAP financial measures, please refer to the accompanying presentation or to our press release published earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today's press release and in the supplemental information attached to today's presentation. At the end of today's prepared remarks, we'll have a Q&A session for sell-side analysts to ask questions. I'll now turn the call over to Charles Liang, Chairman and Chief Executive Officer. Charles?

Thank you, James, and good afternoon, everyone. Today, we have released our fiscal 2021 second quarter financial results. Now let's take a look at some highlights from the quarter. Our fiscal second quarter net sales totaled $830 million, down 5% year-over-year and up 9% sequentially, landing at the midpoint of our guidance range. Our fiscal Q2 non-GAAP earnings per share was $0.63 compared to $0.55 in fiscal Q1 of 2021 and $0.57 in the same quarter of last year. As we expected, Q2 improved after a seasonally weak Q1. We are proud that we achieved these results despite a very challenging environment as the impact of COVID-19 was significantly worse since early November, which impacted our operations, especially at our U.S. headquarters. Over the same period, however, we had significant international growth to offset the weakness in the United States. Quarterly sales in many Asian and European countries were up double digits, and in some cases, very high double digits, which demonstrates the strength and the improvement of our global sales organization and channel partners around the world. I expect this strong international business growth to continue in the March quarter and beyond. On the topic of our aggressive growth strategy, our new high-profile customers mentioned on our last earnings call did make purchases in Q2, and we remain excited about our relationship with these customers. Additionally, our sales team is continuing their efforts to expand and nurture new opportunities in these accounts for the next few quarters and years. While these efforts have been on track with our internal goals, we have recently sped up our efforts to win new accounts addressing demand. We plan to further accelerate this growth with new incentive programs and executive action. The purpose of these actions, other than to supercharge our sales force, is to restore our original winning culture. We have set aggressive goals for ourselves, and my team is deeply committed to Supermicro's future with more and more passion. To support this international and global growth strategy, we have aggressively expanded our Taiwan campus capacity and capability in production, operations, engineering and sales. The new Building 62 at our Taiwan Science & Technology Park will be online early this summer, which will add another 1 million square feet of manufacturing and office space, efficiently doubling our production capacity within the next 6 to 8 months. In the short term, this effort will alleviate some logistics, production and engineering impact caused by COVID-19. In the long term, I believe that as our Taiwan campus starts to reach higher economies of scale, our revenue and profitability growth will become much stronger in the coming quarters and years. To complement our effort in Taiwan, our building transition in San Jose is on schedule to become online in the next quarter, which will further boost our strong American manufacturing credentials. I'm confident these actions will help us capitalize on many new key market opportunities in our approximately $100 billion TAM. Let's move on to technology and products, with our unique building block solution product approach. Our R&D organizations are hard at work to expand our optimized Intel, AMD and NVIDIA portfolios. In addition, we have doubled our software and service headcount and resources over the past 2 years. These investments are making a great impact on improving customer experience in both solution quality and security. With the upcoming new Intel Ice Lake processor, we again bring the time-to-market advantage, high product quality and application-optimized solutions to our customers. We are pleased to see a strong trend in terms of customer seeding and early deployment requests, and we have started some of our early deployments to our key customers recently. True to our application-optimized product strategy, we believe our Ice Lake product line will provide precisely the best hardware platforms to telco, 5G and AI as well as data center applications. As such, we are prepared for our Ice Lake product line to become a key growth driver in the coming quarters. Although COVID-19 continues to disrupt steadily, our strong foundation has safely supported our company and business. As I have mentioned, we have taken decisive actions to expand our operations, engineering and sales teams in Taiwan to further reduce the COVID-19 impact. These efforts, together with our application-optimized Building Block Solution, have resulted in great progress within our focused business verticals. First, our organic business gained more than 10% new major customer server accounts in the last few quarters, benefiting from our strong product line and expanded Taiwan operations. Our B2B automation, auto-configurators as well as software and service enhancements will continue this growth momentum. Second, we started to refocus on large data center and OEMs about 3 months ago, right after our 10-K was filed. Two high-profile customers have started to ship in small volume recently, and we'll ramp up to a larger scale later this calendar year. We plan to add one or two more large data center or OEM customers in this category before the end of this calendar year. Third, on 5G, telco and IoT, we won a handful of new telco customers last year. We are currently starting to ship small volume with upside, and we expect high-volume shipments to these customers to start this calendar year as well. And number four, our B2B and B2C automation with auto-configurators has been greatly improved in the past three quarters, which is even more critical as COVID-19 forced more remote working environments for many customers and our own employees. We have been developing this powerful project for the past five years, and it will be ready to go live by this quarter end. This will make it much easier to share communication and product correlation among our sales, engineering teams and our customers. As discussed in our last earnings call, we believe that Q1 of fiscal 2021 was a near-term focus point in our business, and our Q2 results are the first proof point that Supermicro is indeed back on the growth track. I'm excited that our recent booking activity, along with our new business initiatives, give us the confidence to provide the Q3 guidance that, if achieved, will reflect a resumption of quick growth on a year-on-year basis. Furthermore, we are pleased to announce a newly approved $200 million share repurchase program, which investors will view as a sign of our commitment to enhance stockholder value and our confidence in our long-term business success. I will share more detail about our strong growth plan, business scale, our unique momentum and when and how we will reach $10 billion revenue at an upcoming investor event. As the only fast-growing server solution, hardware design and manufacturer company in the U.S. in the last 27 years, Supermicro 3.0 is nearly 100% ready. I mean we are ready to grow quickly. But before I pass on, I'd like to take this chance to announce the appointment of David Weigand as our Senior Vice President and Chief Financial Officer. David joined the company in May 2018 as Senior Vice President and Chief Compliance Officer. A CPA and native of Silicon Valley, David came to Supermicro from HPE where he worked as a Vice President. He was previously the CFO of Renesas Electronics America Inc. David will succeed Kevin Bauer, who is our current CFO and is leaving the company to pursue his passion at a not-for-profit organization at the end of this month. It has been a privilege working with Kevin, and I appreciate his great leadership, hard work and dedication to Supermicro over the past four years. Kevin is credited for improvement of our financial systems and many system automations. I wish him great success in his new venture. I will now pass the call to Kevin one last time to provide additional detail on the quarter and our outlook. Kevin, please?

Thank you, Charles. I'd like to say a few words to our employees and investors. I have enjoyed working with Charles and the very dedicated Supermicro team and helping the company through challenging times over the last four years. I am most proud of the work enhancing our company's financial function, providing a stronger foundation for the company to continue to grow as well as our focus on improving operations to generate cash, which enabled a return of capital to shareholders. To all the Supermicro team, we have accomplished so much together, yet there is unfinished work. Carry on. On a personal note, my new role will be in an area where I have strong passion for and also serves a community that I have a long association with. I'm excited to join as the Chief Financial Officer and key business executive to help this organization reach its objective of delivering increasing value. When announced, this new role will make sense to you all. Before jumping into the results of the quarter, I'd like to briefly touch on several accomplishments we made this quarter on the environmental, social and governance, or ESG front, which we recognize is becoming increasingly important to investors. A few of our recent accomplishments include: one, driven by our efforts to comply with social environmental concerns, Supermicro received a near-perfect audit score from the Responsible Business Alliance at our Taiwan manufacturing site in November 2019 with a score of 196.4 out of 200 points. In December 2020, we set a commitment letter to the Science Based Targets initiative and We Mean Business coalition, indicating we will join other companies in striving to keep global warming to the 1.5-degree goal and create company targets. We also joined other leading companies in the Green Grid, where we believe our expertise in hardware design and energy-efficient computing can help drive the industry forward. In January 2021, Supermicro transitioned its San Jose grid energy sourcing to wind RECs, signifying that, in conjunction with our Bloom Energy fuel cells, all our use of energy at our new and old San Jose campuses will not result in the burning of fossil fuels. We believe these recent accomplishments and milestones continue a long history of our commitment to green computing, sustainability and generally making the world a better place for future generations. Now turning back to Q2 results. Our fiscal second quarter revenue totaled $830 million. This reflects a 5% year-on-year decrease from the same quarter of last year and a 9% increase from the first quarter of fiscal year 2021. Systems comprised 77% of total revenue, and volumes of systems and nodes shipped were up sequentially but down year-over-year. System ASPs increased year-over-year but were down modestly quarter-on-quarter. Turning to geographic performance, our international sales strengthened after two quarters of softness. On a year-over-year basis, the U.S. decreased 12%, Europe increased 5%, Asia declined 3%, and the rest of the world increased 68%. On a sequential basis, U.S. sales declined 7% quarter-on-quarter, Europe increased 38%, Asia increased 27% and the rest of the world increased 86%. From a customer point of view, we saw a pickup in sales to OEM customers, but this was offset by the expected digestion after a strong Q1 contribution by new high-profile customers that we mentioned last call. From this point forward, unless otherwise noted, I will be discussing financial metrics on a non-GAAP basis. Working down the P&L, Q2 gross margin was 16.4%, up 50 basis points year-on-year and down 70 basis points quarter-on-quarter. Recall on our November earnings call, we stated that we expected gross margin to decline 160 to 200 basis points on a sequential basis, chiefly due to the absence of a cost-recovery benefit as well as elevated freight costs. While we did see elevated freight costs, we did, however, benefit from additional cost recovery, similar in magnitude to the benefit we experienced in fiscal Q1, or about 130 basis points. We do not anticipate a similar benefit going forward. Turning to operating expenses, Q2 OpEx on a GAAP basis decreased 1% quarter-on-quarter and 11% year-on-year to $99 million. Q1 GAAP operating expense benefited from a credit of $2.1 million for an executive SEC settlement, and Q2's GAAP operating expenses contain $2.5 million in special performance bonuses. Without these factors, Q2 GAAP operating expenses would have been down more significantly quarter-on-quarter. On a non-GAAP basis, operating expenses decreased 5% quarter-on-quarter and 12% year-on-year to $90 million. The sequential decrease in non-GAAP OpEx was primarily due to lower audit fees, lower R&D expense due to higher-than-normal credits for NRE work performed and overall expense discipline. Other income and expense was a $13.1 million loss as compared to a $1.5 million loss last quarter. The increased loss was chiefly driven by the remeasurement of our Taiwan dollar loans to a weaker U.S. dollar. This quarter, our tax expense was $5.1 million on a GAAP basis and $7.1 million on a non-GAAP basis. Our non-GAAP tax rate was 16.4% for the quarter. Going forward, we continue to expect our tax rate to be approximately 16%. Lastly, our joint venture contributed a loss of $1.0 million this quarter related to an air pocket in revenue, as compared to income of $1.3 million last quarter and a loss of $1.0 million the same quarter a year ago. Q2 non-GAAP diluted EPS totaled $0.63 as compared to $0.55 in Q1 of fiscal '21 and $0.57 in the same quarter of last year. Cash flow from operations totaled $63 million compared to cash flow from operations of $121 million in Q1. CapEx totaled $14 million, resulting in free cash flow of $49 million. Our closing balance sheet position for cash was $315 million, while bank debt was $45 million, resulting in a net cash balance of $270 million. Please also note that we completed our previously announced $50 million share repurchase program on January 6, wherein we repurchased 1.68 million shares at a weighted average price of $29.82. As Charles mentioned in our earnings release today, we concurrently announced that we have Board-level authorization for the company to repurchase up to another $200 million of our common stock in a new share repurchase program. The program is effective until July 31, 2022. As Charles mentioned, we believe this action reflects our commitment to enhancing stockholder value and our positive long-term view of our business opportunity and cash generation prospects. We expect to execute the program in coordination with our cyclical working capital needs and growth. Turning to working capital metrics, our Q2 cash conversion cycle was 92 days, down from 107 days last quarter, but still outside our target of 85 to 90 days. While the absolute level of our inventory declined, days of inventory at 105 days remains elevated relative to our historical levels as we prepared for the impact of the Lunar New Year logistic challenges and some tightening of components. Days sales outstanding was 36 days, while days payable outstanding totaled 49 days. Now turning to the outlook for our business. We expect net sales for the quarter ending March 31, 2021, in the range of $790 million to $870 million. We expect gross margins to decline approximately 120 to 160 basis points sequentially due to the lack of a cost recovery discrete event that we explained earlier over the last two quarters and also the product mix that we expect to ship in the quarter. We expect our non-GAAP operating expense level to increase quarter-on-quarter to the mid-90s driven by payroll taxes in the new year and selective investing in R&D. We continue to anticipate our GAAP and non-GAAP tax rate to be approximately 16% going forward. And we expect other income and expense, including interest expense, to total roughly $1 million and expect a contribution from our JV of roughly $0.5 million. We expect fully diluted GAAP earnings per share to be in the range of $0.22 to $0.42 and fully diluted non-GAAP EPS to be in the range of $0.37 to $0.57. And we continue to expect our CapEx for fiscal 2021 to be in the range of $55 million to $60 million, inclusive of our ongoing Taiwan building project mentioned earlier by Charles. James, we're now ready for Q&A.

Thank you, Kevin. One quick announcement before entering Q&A, we will be attending the Goldman Technology Conference on February 11 and conducting meetings with investors. Operator, we're now ready to take questions.

We have your first question from Ananda Baruah from Loop Capital.

Congrats on solid results. And Kevin, congrats as well. It's been good working with you. Well, good luck and we'll miss working with you. Yes, I guess a couple if I could. I guess the first one is just broadly speaking, how should we—how would you like us to think about the various catalysts as we move through the year and the things that we should keep an eye out for and what you're expecting to impact the business? You spoke to a number of them in the prepared remarks; I would just love to get more context on how we should think about them layering in. Then I have a follow-up or two.

Yes. I believe our business has been very solid now, except COVID-19, which is still very severe in the U.S. We are very carefully taking care of that while aggressively growing our operations and business in Taiwan. As COVID gets under better control, we expect our business to return to a much stronger growth period. So we have a good feeling about the coming quarters and years.

And Charles, when you think about some of the newer aspects of your business, you mentioned Ice Lake coming in upcoming quarters and hyperscale, and the 5G systems going into telcos. Could you rank for us, even if anecdotal, which of those you think would be most impactful when you look back on 2021—hyperscale, Ice Lake, the 5G telco business?

Yes. As I just shared, we started to focus on large data center and OEMs about three months ago, and we already achieved a couple of wins that have started to move. We believe those volumes will ramp up very soon this year and next year. Regarding 5G telco, we have engaged a handful of world-class telco customers. Those relationships are solid, and they have started to move in small volumes. We also expect high volume to follow soon, and these will be long-term partnerships. Overall, we are very optimistic about our long-term growth.

Okay. Great. I'm going to sneak one last one in here. Charles, I believe it was you in the prepared remarks who mentioned the investor event. Do you have a timeframe you're thinking about for that?

Yes. You mean the investor event? I hope within the next few weeks because we still have the last quarter. But because COVID-19 got very bad, we took a wait-and-see approach. Now it looks like things are getting under better control. So I hope in the next few weeks we will have a big investor event to share the company plan, future momentum and how we will reach our goals with investors.

Just to clarify for myself: in the next few weeks, do you think you'll be announcing the date of the event, or do you think you may actually be having it in the next few weeks or so?

I guess we will announce it in the next two weeks, for example, and hopefully have the event in three to four weeks.

We have your next question from Jon Tanwanteng from CJS Securities.

A very nice quarter. And Kevin, congratulations on moving on to the next phase. My first question is on Intel; when they spoke about the quarter, they thought they were seeing another quarter or two of digestion in the cloud and data center space. It seems like you're not seeing that. I was wondering what kind of customers you are seeing strength from that's maybe running counter to what they're saying? Is it maybe just from AMD? Or is it another end market? Just give me a sense of why your strength is running opposite to what they're seeing?

Yes. As you know, we have a very strong Intel product line and also a pretty big AMD product line. Once the market has demand, we will grow. Even if the market is flat, because of our outstanding products and data solutions, we believe when the market is not too bad, we will have a chance to grow smoothly, and if the market grows, our growth will be significant. Since the company was founded in 1993 through 2017, our growth has often been much faster than the industry average, and I believe we are returning to that position very soon.

Okay. And then just on the impact that COVID has had on the business, can you call out the impact on either the margin or the revenue that you had in December and into January so far? You mentioned higher freight expenses, but lockdowns probably had an impact as well. Are you seeing anything like employee absenteeism? If you could quantify or give some color on the impact of the pandemic so far, that would be helpful.

Yes, the impact has been broad and very significant for more than nine months now. Logistics have become much harder, including shipping delays and significantly higher shipping costs. Even shipping from Asia to the U.S. has seen increased delays and costs. Many customers are working from home and some of our employees are working from home as well. All of those factors created difficulties for the business, especially for application-optimized solutions. The good thing is that our auto-configurator tool, which helps sales teams, engineers and customers work together to make optimal solutions, is getting ready. By the end of this quarter, most of our sales, engineers and customers will be able to use those tools. I'm very excited for the tool to be available this quarter.

If you don't mind me asking one more...

Yes, Jon, this is Kevin. I would just echo what Charles has said: when you have work from home, it definitely reduces organizational coordination, so we have to push harder in that area. There are also operational issues such as confirming that there's someone on the other side to receive shipments— not all companies are open every day. So there are a lot of small operational differences that make conducting business more difficult, as Charles mentioned.

Understood. And if I may ask, looking beyond the pandemic, Charles, I know your new facility is opening up in the second half of this year or earlier this summer. What can margins look like on a normalized basis without all of these headwinds, when you have new facilities and more volume from customer shipments? Maybe share some of the plans you have and where margins could go.

Yes. We serve two kinds of customers. One segment is high-end enterprise customers who value better product, better performance and better service. The other segment is high-volume customers who are cost sensitive. With our Taiwan facility coming online, especially by early summer, we will have much bigger capacity and can better serve those high-volume, cost-sensitive customers. We have been lining up those customers for about the last 12 months, and relationships have been established with readiness to support them. In terms of impact, I would say maybe around a 2% improvement or a little bit more in the overall margin profile. That small percentage can be a big difference for high-volume customers, so we are very happy to have these opportunities ready from Taiwan.

We have your next question from Nehal Chokshi from Northland Securities.

Congratulations on the strong gross margin and a very strong revenue guidance. On the net income, the midpoint of the net income guidance implies about a $9 million decline. How should we parse that between gross margin and OpEx for the March quarter?

I think we shared that gross margin is expected to decline quarter-over-quarter because of some cost increases as well as the specific mix of products that we're going to ship. So I would say weight it toward gross margin expectations for the immediate quarter; that will be the heavier factor in the decline.

That's helpful. Charles, could you clarify what you mean by large OEM opportunity?

Okay. Especially during the pandemic, internet and social networking companies had strong demand. Those high-volume customers move in large quantities but want lower prices. Previously, we did not really focus on that segment. But because our Taiwan operations are getting ready, we started to engage with these customers and received very good feedback. We are really engaged with some of them and are shipping small volumes now; the high-volume shipments should follow later this year.

So just to be clear, is there a partnership with HP and Dell to get to the social networks? Or are you referring to large Internet properties as the OEMs directly?

The good thing about Supermicro is that in the last 27 years we established our brand name and credibility for quality and service, and our management software and service are recognized globally by enterprise accounts. We are ready to work directly with any kind of customer or go through OEMs. So the opportunity is open either way.

Coming back to Kevin: over the past few quarters, you guys have returned about 50% of free cash flow to shareholders via share repurchases, which is very good. I know you said you are evolving your capital allocation policy. Is that 50% rate a good way to think about how you're thinking going forward? And what about the remaining 50%—is that for future growth?

I think what I tried to share was that in the new $200 million program, it's got roughly an 18-month or so duration given the date that it's valid through. Investors I have worked with know we take an incremental approach; we took the first two steps in stock buybacks. We got feedback that if we feel confident, we should back that up with a longer-term program, and that is what we have done. So it's a step-by-step process. The competing forces for capital allocation will be the rate of our growth. That's the key factor. We hope to continue to grow strongly and have adequate cash flow to execute that $200 million program over the 18-month timeframe. It will be a balance between buybacks and investments needed in R&D for continued product development. Regarding Taiwan, we're kind of in the late mid-innings on the investment there: the building is close to being completed. I think it's going to be June. So that cash consumption will abate for a while because our maintenance capital is like $5 million to $7 million a quarter. That will help free up some cash in the second half of calendar 2021. Those are the moving pieces we're thinking about, and with continued cash generation, we felt confident to approve the $200 million program.

Fantastic. My final question: you mentioned that NRE work was part of the R&D quarter-on-quarter decline. What's the decision process for when Supermicro undertakes this type of NRE work? Can you talk about that quickly?

We work closely with key component suppliers to develop platforms that work with their key components. We evaluate the likely popularity of those platforms and then enter into arrangements to support them. These NRE engagements tend to be relatively short term—often around half a year—so they are not multi-year commitments, which makes those decisions easier. They are also not very large in absolute terms and the prospects for the products tend to be near-term.

I'll add that pace is a factor. We have some very close partners who want us to present something unique that outperforms in the market, and some customers want outstanding, unique platform designs. We work with both vendors and customers on those special designs, and usually they pay some NRE for that work.

What type of return in revenue or gross profit dollars do you typically see when you pick this type of NRE product that you expect to become a platform driving future sales?

Our goal is not the NRE itself but the partnership. When you work with a vendor to design and optimize a solution, we go to market together. The same applies for customers with special applications or data center architectures; we design an optimized solution for them. The Building Block Solution nature of Supermicro makes it much easier and more efficient to design unique solution models, which can drive future sales and differentiation.

We have your next question from Aaron Rakers from Wells Fargo.

Congrats, and Kevin, also great working with you in the past. I wanted to ask about where we stand in the server cycle and the impact for Supermicro. You mentioned Ice Lake and AMD Milan. How do you see the demand profile for these next-generation server CPUs materializing? Would you expect to see an ASP uplift benefit Supermicro as these next-gen CPUs come into the model?

As you know, a new generation platform always outperforms the previous generation. For the same price, they can be 10% up to 40% faster in performance. A lot of our large customers want new generation products. Supermicro is well positioned as a building-block solution provider to introduce new technology earlier than others. This time we again have that advantage. Besides the market growth, because we offer better solutions, service and quality, we believe we will gain market share as these next-gen platforms are adopted.

Dovetailing off the COVID challenges: how would you characterize the component supply chain and component availability today? There have been indications that certain areas are tight or constrained. Have you seen any constraints, and what's your outlook looking into the next couple of quarters?

We have seen constraints across many different components. We have been carefully engaging with our partners, providing forecasts and signing contracts. Logistics costs have increased and lead times have lengthened. But with our contracts and long-standing relationships, at this moment I feel there are challenges, but we should be safe to support our planned growth.

A final question: a couple of years ago you had a customer that accounted for 10% of revenue. With these new larger data center wins that are set to ramp, do you think you'll have a 10% customer in the future again?

It's hard to say. We try to add many more customers because our customer base is still small compared with our long-term goals. With larger capacity, we can engage many more partners. Whether we return to having a single 10% customer or become more diversified, both outcomes are manageable and acceptable. I'm neutral on that—diversification is good, but having a large customer is also a sign of success.

We have your next question from Nehal Chokshi from Northland Securities.

I am particularly impressed with the guidance given that at the September quarter call you indicated an expectation that Ice Lake would become generally available for several OEM launches by early 2021. That hasn't happened yet and looks more like a Q2 '21 event now. Given that context, does that mean that the rest of your business has significantly strengthened relative to what you thought at the September call?

Yes. Supermicro has a much more diversified product line now and a more diversified customer base by vertical and by account. With our expansion in Taiwan and increasing capacity in the U.S., we are ready to be a much larger company. Our diversified customer set and product portfolio have strengthened our business relative to previous expectations.

Speaking to that greater diversity and exposure, can you give us a sense of your exposure to some of the faster-growing parts of the market you are addressing?

For example, telco 5G is a market we did not focus on before, but about two years ago we started to focus on it and are engaged with good partners globally. For large data center and OEM, we also began to engage about 12 to 18 months ago and have achieved good progress. We continue to extend our IoT product line. Supermicro aims to be a more diversified, full-service one-stop partner for customers.

Would it be fair to say that these three areas you just highlighted represent maybe 30% of revenue now?

We did not disclose that specific breakdown. As mentioned, Supermicro is focused on growing to be a $10 billion revenue company in the future, and at the investor event we will share more detail about our revenue mix and strategy.

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Charles Liang, Chairman and Chief Executive Officer. Sir, please continue.

Yes. Thank you, everyone, for joining us today, and looking forward to meeting you next quarter. Have a nice day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.